PLDT sees H1 income of between P5B and P6B

Telecommunications giant Philippine Long Distance Telephone Co. (PLDT) is expected to report a strong first half performance, with net income of between P5 to P6 billion on the back of a sterling performance by wireless subsidiary Smart Communications Inc., The STAR learned yesterday.

PLDT president and chief executive officer Manuel V. Pangilinan said yesterday in an interview that the company’s consolidated net income for the January to June 2003 period will definitely exceed P5 billion.

Company sources told The STAR that PLDT’s profits for the first six months of the year will be anywhere between P5 to P5.8 billion. In 2002, net income for the first half reached P2.8 billion.

Pangilinan, in an earlier interview said "we wouldn’t be doing our job if we don’t hit a P10 billion net income for the full year of 2003." The company posted a P7.2 billion net income last year

Expectations are high that PLDT will report a consolidated net income of at least P5 billion, but company officials said the possibility of exceeding expectations is not remote and a net income of P6 billion or even more may be announced. PLDT will officially announce its first semester financial and operational performance on Wednesday.

However, foreign analysts have cautioned that PLDT’s strong performance may give it reason to start provisioning and writing down some of its assets as the company aligns itself with international accounting standards.

In 2002, PLDT fully wrote off its investments in subsidiary Pilipino Telephone Inc. (Piltel) which lowered PLDT’s full year net income, but was seen by many as a prudent move as it manifested the company’s commitment to raising its standards of accounting to international standards as the Philippines is expected to adopt the US Generally Accepted Accounting Principles (GAAP) come 2005.

ING Barings’ latest report sees the possibility of PLDT writing down some of its assets such as Home Cable, and Aces Philippines.

Company sources however told The STAR that any write-down will be principally non-cash in nature and, therefore, will in no way affect PLDT’s strong cash flows and its ability to pay down debt.

PLDT is anticipated to pay down about $150 million or more in debts during the first half of the year since Pangilinan has signaled debt reduction as a priority for PLDT’s fixed line business.

The company has already stated that it will provision over P1 billion for its successful manpower reduction program which it implemented during the first quarter of the year.

PLDT was able to reduce headcount by over 1,600 employees making the company more efficient in its bid to strengthen its fixed line business through cost reduction. PLDT expects to recover these costs in a little over 12 months.